Small town uses local tax to create jobs, slow population loss

Population loss is one of the biggest challenges facing rural Nebraska - but when it feels like there are no jobs and no opportunities, it's not surprising that residents turn elsewhere.

One small town in Central Nebraska is trying to change that.

One recent, blustery Friday, standing at the corners of 16th and L streets in downtown Ord, Caleb Pollard's pride in his town was obvious.

Photo by Hilary Stohs-Krause, NET News

Ord, Neb. passed a sales tax in 2001 that has resulted in tangible changes in the town of 2,000.

Photo by Hilary Stohs-Krause, NET News

The former Valley Cinema received a lot of help from Valley County Economic Development with its $730,000 renovation.

Photo by Hilary Stohs-Krause, NET News

Chad Williams, manager, talks about the renovations they're planning for the former Valley Cinema.

Photo by Hilary Stohs-Krause, NET News

The renovation of the former Valley Cinema in Ord, Neb. Included changing everything from the carpet to the seats to the lights.

"When you look at a town of 2,100 like we are, and you put $800,000 in the local economy in one year, that has a measurable impact, immediately," said Pollard, executive director of Valley County Economic Development. "With the exception of maybe one or two buildings, all of downtown is full. And how many communities, I ask, are off the interstate as far as we are, 75 miles, that can say they have a full downtown?

"Not very many."

It started 20 years ago, when the Nebraska legislature passed a bill allowing municipalities to collect a voter-approved local sales tax to be used for economic development. Since then, cities statewide have taken advantage, from Scottsbluff to Albion, but Ord has become somewhat of a poster child for the program. Since the town passed its sales tax in 2001, millions of dollars have been funneled into programs like site acquisition, marketing and low-interest loans to local businesses.

"We actually dug out the old basement, so we busted out the concrete, took out all the brick, took all the sand out, when back down to the original basement."

That's Brian Magiera, a native of Scottsdale, Ariz. He moved to Ord 16 years ago after marrying his wife, Kelly, an Ord native.

Five years ago, they bought the town cinema - but as Netflix and similar watch-from-home services have soared, the Magieras found they were dumping $700 to $1,500 per month into the business, just to stay open.

So they decided to complete revamp - literally down to the studs. The renovated building will host a restaurant, stage for live performances, meeting rooms and bar, and will result in four full-time jobs (they've already chosen a chef, who moved to Ord with his family from North Carolina). The Magieras hope to open at the end of March.

But those changes haven't come cheaply, and the couple turned to Valley County Economic Development for help with the $730,000 price tag. Pollard guided them toward a tourism grant, and they were recently given first-round approval for an Ord sales tax loan.

"The city sales tax is definitely a key," Brian Magiera said. "(It's) a very important piece of our puzzle."

Their story is pretty average, in the sense of combining grants and private loans with a sales tax-funded loan. But the Mageiras aren't only pouring new concrete into the building - they've poured their savings and retirement funds, as well.

Does this worry them?

"Oh, absolutely. Absolutely," Brian Magiera said. "The reason we did it is, one of two things had to happen: Either we were going to continue on putting money into the theater at a loss on a monthly basis, and then at some point decide we're going to close it and shut the door, or we decided, Let's double-down - or in this case, quadruple-down - and put all our eggs in one basket.'"

Loans always carry risk, Pollard said, but the city is pretty selective when it comes to granting them. He said about one in four who initially approach the development board are actually approved.

Two borrowers have defaulted during the eight years the loans have been offered; both reached settlements that covered the initial amounts of their loans.

And it's not just new businesses looking for financing. Joe Wadas runs Wadas Inc., a heating and cooling company his father started 56 years ago, and he used a sales-tax funded loan to purchase needed equipment.

The Nebraska Department of Economic Development - Learn more about the Local Option Municipal Economic Development Act (LB840), which first created the local sales tax program, including a list of cities whose voters approved such a sales tax.

"It saved a lot of hand work," he said, sitting in his office near downtown Ord, "and we can get more done in an hour than we could probably do before in better than half a day."

Ord has granted a total of 38 loans to local businesses within the city and Valley County. The county's unemployment rate is below 3 percent, and 105 new businesses have opened in the last decade.

But Ord's accomplishments and economic stability are built on the back of two industries known for their instability: ethanol and agriculture.

"If there is another downturn in ethanol, it will have a substantial negative effect here," Pollard said matter-of-factly. "I mean, we can't ignore that. It will have an effect. It's one of our largest private employers here in town, they employ forty people. You know, the same thing could be said if ag does down the tubes, we're screwed. I mean, that's the reality of it.

"Part of the reason why we've really focused on so many small projects is we do diversify a bit, and create businesses that aren't necessarily entirely reliant on the ag economy."

Ord is also limited in what outside companies they can bring in, given their distance from the interstate and lack of substantial rail options.

And despite their successes and aggressive attitude toward development, not everyone thinks using sales taxes to fund it is a good idea. In a small town where everyone knows everyone, resentment can build when a neighbor or granddaughter's project is rejected.

Others have accused Valley County Economic Development of being too socialist, Pollard said.

But he and Ord business owners argued they're just doing what they can with the resources on hand.

"That's one of the unique things, I think, about our economic development strategy, is we're focused on building from within," Pollard said. "And that's a fundamental difference than a lot of other communities that have a focus on economic development. We spend our money on our own human capital that's here, and we have a really vibrant local economy because of it. Because we're investing in local people."

Soon, cities like Ord might get a boost in the form of a bill from Nebraska Sen. Brad Ashford of Omaha that would increase the sales tax amount municipalities can levy from 1.5 percent to 2 percent.

"Urban areas like Omaha are going to continue to grow. And their needs are going to continue to grow," Ashford said. "As people come into the city especially from out of state, like they do to use the Qwest Center, it would be nice to be able to capture some revenue from those sales. Because again, they're helping to pay what property tax payers are paying every day on their property tax bill."

State aid to cities was cut last year, and Ashford said mayors and cities from across the state have told him they have projects and needs that require funds, and that they would seek to put a sales tax in front of voters.

But while urban areas can expect continued growth, many rural cities have to work at simply maintaining a stable population.

Valley County, for example, hit its population peak 90 years ago, and has been steadily losing people since - although at a pace that's half what it was in the '90s, a pace that's the lowest in 40 years.

Pollard said he thinks the city sales tax is a big part of Ord's relative success. He admitted it can be "incredibly sensitive" taking calculated risks with taxpayer money, but added that the town has limited options.

"I don't know if we have any other choice," he said. "The alternative here, and everyone experienced it, is declination: population decline. I mean, that's the biggest thing that we're concerned about. How are we going to create an environment that's going to invite people back to the community?

"Because the rest of the Great Plains is suffering the same fate that we are."